BRIEFING ON EUROPEAN CONSTRUCTION
Boom in Austria's construction sector,
widespread optimism in the industry
by Michael Klien, Austrian Insitute of Economic Research
Austria is currently in the middle of an economic upswing. With forecasts of 3.0% in 2017 and 2018, growth rates are well above the European average, and even in the medium term conditions look favourable. The current upswing is based on a widespread increase in economic activity across virtually all segments of the economy. A number of drivers ranging from a pick-up in world trade to high consumer-confidence are responsible for the unexpectedly strong development. Similarly, the Austrian construction industry experienced a slow but systematic improvement since 2015. Now in 2017 all three major construction segments residential construction, non-residential construction and civil engineering are expected to exhibit significant production gains. Unlike the European development where housing is key driver, Austria's construction growth is strongly stimulated by non-residential construction. Since 2015, this segment proved more dynamic than residential construction, and is forecasted to grow by 3.4% in 2017. Especially corporate related construction works in the area of commercial, industrial and office construction benefit noticeably from the economic recovery.
A particular role in the current upswing takes business sentiment in the construction sector. WIFO's Konjunkturtest an economic sentiment indicator that WIFO, the Austrian Institute of Economic Research, conducts on behalf of the European commission shows that since the economic crisis, business sentiment in Austria's construction sector was very low, outright pessimistic. Except for a short lived mirage recovery in 2012, the number of pessimistic outlooks exceeded optimistic views by a wide margin. This indicator suggests that in two large waves since mid 2015, the mood in the construction industry shifted from considerable pessimism to high degrees of optimism. Firstly, throughout the second half of 2015 until early 2016, the economic sentiment regarding the current state of the construction sector as well as the outlook for the next months improved consistently over time. Optimistic views overtook pessimistic views in September 2015, levelling off at a largely neutral view of the sector until mid 2016. Then in a second wave, the indicator rose very strongly for more than 6 months in a row until spring 2017. In April 2017, the optimistic enterprises outnumbered the pessimistic ones by more than 20 percentage points. Since then the indicator has remained in a narrow band between with more than 20 and 30, underlining the very stable and consistent optimism in Austria's construction sector. As the results from the latest poll in Nov. 2017 show, there is no sign of a reversal in business sentiment yet (see info box below): the sentiment indicators emphasize the positive current situation and indicate that firms remain optimistic for the start of 2018. Moreover, according to the survey, the currently largest worry of Austria's construction companies appears to be a lack of (qualified) staff - largely exceeding other factors like a lack of orders or bad weather. This is another testimony of the current boom in Austria's construction industry, which has yet to show any signs of an ending.